This site uses cookies to provide you with a more responsive and personalised service.
By using this site you agree to our use of cookies.
Please read our cookie notice for more information
on the cookies we use and how to delete or block them.

The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IAS 24 — Related Party Disclosures

Overview

IAS 24 Related Party Disclosures requires disclosures about transactions and outstanding balances with an entity's related parties. The standard defines various classes of entities and people as related parties and sets out the disclosures required in respect of those parties, including the compensation of key management personnel.

IAS 24 was reissued in November 2009 and applies to annual periods beginning on or after 1 January 2011.

Related Interpretations

None

Amendments under consideration by the IASB

None

Summary of IAS 24

Objective of IAS 24

The objective of IAS 24 is to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties.

Who are related parties?

A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to as the 'reporting entity') [IAS 24.9].

(a) A person or a close member of that person's family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of the following conditions applies:

(i) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment defined benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity*.

* Requirement added by Annual Improvements to IFRSs 2010–2012 Cycle, effective for annual periods beginning on or after 1 July 2014.

The following are deemed not to be related: [IAS 24.11]

two entities simply because they have a director or key manager in common

two venturers who share joint control over a joint venture

providers of finance, trade unions, public utilities, and departments and agencies of a government that does not control, jointly control or significantly influence the reporting entity, simply by virtue of their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision-making process)

a single customer, supplier, franchiser, distributor, or general agent with whom an entity transacts a significant volume of business merely by virtue of the resulting economic dependence

What are related party transactions?

A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged. [IAS 24.9]

Disclosure

Relationships between parents and subsidiaries. Regardless of whether there have been transactions between a parent and a subsidiary, an entity must disclose the name of its parent and, if different, the ultimate controlling party. If neither the entity's parent nor the ultimate controlling party produces financial statements available for public use, the name of the next most senior parent that does so must also be disclosed. [IAS 24.16]

Management compensation. Disclose key management personnel compensation in total and for each of the following categories: [IAS 24.17]

short-term employee benefits

post-employment benefits

other long-term benefits

termination benefits

share-based payment benefits

Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly, including any directors (whether executive or otherwise) of the entity. [IAS 24.9]

If an entity obtains key management personnel services from a management entity, the entity is not required to disclose the compensation paid or payable by the management entity to the management entity’s employees or directors. Instead the entity discloses the amounts incurred by the entity for the provision of key management personnel services that are provided by the separate management entity*. [IAS 24.17A, 18A]

* These requirements were introduced by Annual Improvements to IFRSs 2010–2012 Cycle, effective for annual periods beginning on or after 1 July 2014.

Related party transactions. If there have been transactions between related parties, disclose the nature of the related party relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements. These disclosure would be made separately for each category of related parties and would include: [IAS 24.18-19]

the amount of the transactions

the amount of outstanding balances, including terms and conditions and guarantees

provisions for doubtful debts related to the amount of outstanding balances

expense recognised during the period in respect of bad or doubtful debts due from related parties

Examples of the kinds of transactions that are disclosed if they are with a related party

purchases or sales of goods

purchases or sales of property and other assets

rendering or receiving of services

leases

transfers of research and development

transfers under licence agreements

transfers under finance arrangements (including loans and equity contributions in cash or in kind)

provision of guarantees or collateral

commitments to do something if a particular event occurs or does not occur in the future, including executory contracts (recognised and unrecognised)

settlement of liabilities on behalf of the entity or by the entity on behalf of another party

A statement that related party transactions were made on terms equivalent to those that prevail in arm's length transactions should be made only if such terms can be substantiated. [IAS 24.21]

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only
hyphenated at the specified hyphenation points.
Each word should be on a separate line.